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January 29, 2014

Tibergien: Time to Move Beyond ‘Serving Dead and Dying’

“This is a business built by and for baby boomers, but that won’t last long.”

In his presentation to broker-dealer executives at the Financial Services Institute’s OneVoice conference in Washington, Mark Tibergien spoke those words midway through his speech, making explicit what was an underlying theme at the broker-dealer advocacy group’s annual conference.

In a conference that celebrated FSI’s “Decade of Success,” there was some looking back at where the independent broker-dealer business has come from, but there was much more focus on the future. Among the issues: where is the next generation of advisors to come from? Will IBDs’ business model allow for attracting and retaining younger advisors? Will regulatory and market pressures allow BD reps to serve younger clients who may not yet possess wealth? How can you build a business for future success when so many of your advisors and their clients are in or nearing — or should be planning — retirement?

Not new questions, and Tibergien for one has been warning the industry for years of a looming advisor shortage as the existing advisor force ages while boomers near or enter retirement. To be sure, some independent BDs have not only attempted to answer those questions for some time, with some succeeding in lowering the average age of their rep forces while others have embraced new forms of marketing communications to attract younger clients, such as social media.

With tongue only partly in cheek, Tibergien chided the BD executives for pursuing a strategy of “serving the dead and dying,” suggesting that if BDs are focusing on succession planning they should stop and focus instead on developing those reps who are growing their practices. That’s Pershing Advisor Solutions’ target clientele in the RIA space, but these are broker-dealers, right? Their reps are different from RIAs, but maybe not so much, Tibergien suggested in his speech.

So why aren’t younger people flocking to become advisors? After all, as Tibergien likes to say, it’s a business where you “profoundly impact the lives of other people. It’s financially rewarding. It’s intellectually stimulating.Throw in walks on the beach and it’s a pretty good personals ad.” Jokes aside, Tibergien said he had learned, partly from his own 25-year-old reverse mentor at Pershing, that younger people think advisors are too much like salespeople and that they associate everybody in financial services with the “worst excesses of Wall Street.”

To counteract that perception, Tibergien suggested an industrywide approach was necessary, including recruiting on campuses like the accounting and legal professions do. He also criticized the internecine sniping between “Wall Street”” and “Main Street” firms, between broker-dealers and RIAs, failing to recognize that “any time we jump in the puddle, mud will splash on everybody” in financial services.

In a separate interview during OneVoice, Sanjiv Mirchandani, who runs Fidelity’s National Financial clearing arm, agreed that “this can’t be a business where only baby boomer advisors serve boomer clients,” then cited some broker-dealers that have had success, such as Cambridge Investment Research, whose president, Amy Webber, reported in another session that more than 18% of Cambridge’s reps are under 40. Cambridge has made a concerted effort to recruit and retain younger advisors—and to mold Cambridge’s service offerings to younger clients—partly through the efforts of its New Century Council, an advisory board at Cambridge at which under-40s comprise the majority.

Solving the next-generation problem of advisors and clients may well be one of those areas where larger BDs have an advantage. As one broker-dealer executive said in an interview: “To do that, you need scale.” Or, perhaps, an industrywide effort.